What does an advisory accountant do?

For small business owners to have the greatest chance of growing their companies with exposure to the least possible risk, they need the services of an advisory accountant.

Similar in many ways to a part-time financial director or non-executive director but without a position on the board, an advisory accountant’s role is to help an owner and the senior management team navigate the obstacles and exploit the opportunities presented on their journey to their target destination.

Unlike a part-time financial director or a NED however, an advisory accountant is also responsible for the provision of their client’s accounting services.

You’re responsible for the financial recordkeeping of the business and you’re also responsible for dispensing advice based upon the information and insights contained within the financial records.

There is significant fee earning potential as an advisory accountant and, as your role develops, you can share some of the responsibilities with other staff within your practice – an ideal training and development opportunity for your junior accountants.

Over time, your practice may well become known as the practice whose team has a proven track record of helping its clients to achieve the goals they set for their business.

With this reputation, the chances of our practice landing larger, higher-paying, and wider-ranging accounts from ambitious and well-funded companies increase.

Who needs an advisory accountant?

The clients who need an advisory accountant the most are those clients who feel that their businesses:

  • are currently treading water,
  • are in a downward spiral,
  • are benefiting from increasing turnover but this is not translating into enough additional profit,
  • should be more efficient than they are now,
  • are profitable but which can’t generate enough free cash flow to expand, or
  • have gone far enough under them and they wish to exit.

Every client is different and you should use your knowledge of your existing clients to determine which ones are most likely to benefit from advisory accountant services.

The best way to win this work is to be in regular face to face or telephone contact with clients where you have full, in-depth conversations during which you can explore clients’ real feelings on their businesses and the progress they feel they’re making or failing to make.

Am I qualified to become an advisory accountant?

Yes – absolutely.

We understand why even many experienced accountants initially baulk at the idea of adding an advisory capacity to their roles other than lack of time.

Perhaps the most significant reason for this reticence is the feeling that they are not good enough businesspeople than they are because their client’s turnover is higher, sometimes much higher.

This reluctance is understandable, of course, but ultimately misplaced.

You too are a businessperson and you share many of the same challenges as your clients.

Like them, you need to make sure that you price your services correctly, you make the highest possible margin on your work, you have the money to meet your obligations when they’re due, and more.

You have a much deeper understanding of financial performance than your clients and you’re able to perceive in a way your client can’t what is working well and what is not working well from a spreadsheet.

For a £1,000,000 per annum turnover business, your ability to shave 2-5% from their fixed and variable costs would make a significant difference to their level of profitability, the amount of cash they have in the bank, and their attractiveness as a takeover proposition.

Your clients may not have the ability to first interrogate a spreadsheet to see potential cost efficiencies let alone know how to exploit them.

Never underestimate your own business and financial acumen – after all, your clients have already seen this in you and signed up to your services as a result.

What sort of services would I be expected to provide?

Advisory accountants offer four main types of value added services to clients and they are as follows:

1. Financial

Using historical financial performance figures, you can look for efficiencies or savings from your clients’ different cost centres.

We all know that, as long as the cash in the bank is rising quarter to quarter in a company’s account, senior decision makers within businesses often de-emphasis ongoing forensic examination of outgoings until there is a fall in sales.

An advisory accountant can set budgets for each department or for the purchase of raw materials, goods, and services required when a sale is made.

Allied to these savings, an advisory accountant can also produce turnover and profitability forecasts against which the owner and senior management team can measure their performance.

Within the B2B sector, late payment is rife and an advisory accountant can assist with improving credit control and cash flow planning.

2. Process

How much does it cost to generate a lead or a sale? Which members of staff are involved in the marketing, sales, and fulfilment process? How are after-sales complaints handled and are there failures in that system which lead to refunds and client dissatisfaction?

Process advisory accounting examines the labour and the assets involved in the everyday functioning of a company with a view to assessing whether:

  • certain processes can be streamlined to create extra profit and
  • additional investment is needed in other parts of the business to prevent undesired outcomes.

You clearly define each task within a business which needs to be carried out and how many people are needed for this function. You then examine how each task relates to the adjoining task to ensure that mistakes are not made when servicing a client before, during, or after the sale.

This clarity in job function allows staff to know better what they’re doing and for management to better identify which processes are going wrong and who’s responsible for it.

Often when a business grows very rapidly, the owner and senior management don’t change the internal infrastructure quickly or effectively enough creating extra costs and bottlenecks in production and fulfilment.

When a company is operating at or near peak efficiency, costly mistakes are greatly reduced and senior management have much more time available to plan the future of the business.

3. Compliance and forensic

Again, when a company expands, its ability to achieve timely and accurate financial compliance is put under severe strain as the owner and senior management are occupied with handling the business’s inevitable growing pains.

Compliance advisory accounting involves planning and implementing a system for use by your client’s employees and your staff ensuring that all necessary regulation is adhered to and that adherence can be checked instantly if necessary.

Forensic accounting is particularly useful in businesses prone to theft and fraud from both employees and customers.

4. Successor

Succession planning is a complicated area of accounting concerned with the future handover of ownership of a company to other family members or to a purchaser.

The companies most likely to succeed when ownership is transferred (and therefore be more valuable) are companies which do not rely on its shareholding directors to function profitably. In fact, the further the shareholding directors are from the day to day running of the business, the better.

With succession planning, you and the current shareholders identify the areas of business which are the most important and you then identify what skills the person responsible for each area will need to have.

Over time, particularly prior to a company being listed for sale, you and the owner of the business then ready the company’s employees to make it as attractive as possible for a prospective purchaser in addition to preparing and constantly update the library of paperwork needed for due diligence.

Creating time in your practice to offer advisory accounting services

The income opportunities offered to your practice by offering advisory accounting services are impressive.

As well as broadening the fee base of your practice, you also have the opportunity to delegate some of the tasks to junior and senior members of your staff taking the pressure away from you.

Morale is particularly low among many staff working for accounting firms with 42% saying that they were unhappy because of a lack of opportunities for development.

Accounting has meaning and we all look for the meaning in what we do.

Advisory accounting offers staff members, particularly eager junior accountants, additional variety and excitement – a feeling that they’re part of something bigger and more important.

Having the right advisory accounting team makes not only a significant difference to the client but it makes a significant difference to the wider UK economy.

How do you create the time to offer these services given that time and space is at such a premium within most small accounting firms?

Welcome to Hindsight, the new Xero plug-in designed to constantly monitor clients’ business and financial performances using a set of generic and client-specific flags indicating potential threats and opportunities.

With Hindsight, you delegate certain clients or certain areas of responsibility to members of your team.

Hindsight logs into each client’s account every day and, whenever a flag appears, it tells the team member responsible:

  • what each flag means in both a financial and a business sense,
  • how to overcome the issue or exploit the opportunity, and
  • how to interact with the client and deliver value to the client.

We all know that standard accounting is a process – a routine governed by constantly updated numbers on a complex spreadsheet. Hindsight frees up time by automating these process, allocating tasks, and training staff with responsibility for these tasks on how to react.

With Hindsight, you can not only increase the quality of the service you offer to your standard clients but you can also build a motivated and engaged team with the confidence and the knowledge to run the practice when you’re visiting the clients.

For more information on the Hindsight plug-in, please click here. Alternatively, book a call with us by clicking here or click here to email us. 

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